March 24, 2014
Pardon my self-promotion: Hobby Lobby and reverse veil piercing
Posted by Steve Bainbridge

As mentioned in my opening post, I think a key issue in the contraception mandate cases is whether form should trump substance. If Hobby Lobby were David Green's sole proprietorship, there is no question but that he would be able to assert his RFRA and First Amendment claims. Should that change simply because he incorporated his business?

Unfortunately, whether they have allowed incorporated employers to raise such claims or not, courts have failed to articulate a coherent doctrinal justification for their holdings. 

In my article, Using Reverse Veil Piercing to Vindicate the Free Exercise Rights of Incorporated Employers, 16 Green Bag 2d 235 (2013), I proposed that courts should use reverse veil piercing to provide a more coherent doctrinal framework.

Reverse veil piercing (RVP) is a corporate law doctrine pursuant to which a court disregards the corporation’s separate legal personality, allowing the shareholder to claim benefits otherwise available only to individuals. The thesis of this article is that RVP provides the correct analytical framework for vindicating certain constitutional rights.

Assume that sole proprietors with religious objections to abortion or contraception are protected by the free exercise clause of the First Amendment and the Religious Freedom Restoration Act (RFRA) from being obliged to comply with the government mandate that employers provide employees with health care plans that cover sterilizations, contraceptives and abortion-inducing drugs. Further assume that incorporated employers are not so protected. This article analyzes whether the shareholders of such employers can invoke RVP so as to vindicate their rights.

At least one court has recognized the potential for using RVP in the mandate cases, opining that these cases “pose difficult questions of first impression, including whether it is “possible to ‘pierce the veil’ and disregard the corporate form in this context.” The court further opined that that question, among others, merited “more deliberate investigation.” This article undertakes precisely that investigation.

Invoking RVP in the mandate cases would not be outcome determinative. Instead, it would simply provide a coherent doctrinal framework for determining whether the corporation is so intertwined with the religious beliefs of its shareholders that the corporation should be allowed standing to bring the case. Whatever demerits RVP may have, it provides a better solution than the courts’ current practice of deciding the issue by mere fiat.

This proposal met with some considerable hostility from a segment of the corporate law academy, which will be the subject of my next post.

Health Care, Hobby Lobby, Religion, Supreme Court | Bookmark

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